EXHIBIT 10.6

[FIRST UNION LOGO]

LOAN AGREEMENT

First Union National Bank of Virginia
201 South Jefferson Street
Roanoke, Virginia 24011
(Hereinafter referred to as the "Bank")

Optical Cable Corporation, a Virginia Corporation
5290 Concourse Drive
Roanoke, Virginia 24019
(Individually and collectively "Borrower")

This Loan Agreement ("Agreement") is entered into April 25, 1997, by and between
Bank and Borrower.

Borrower has applied to Bank for a loan or loans (individually and collectively,
the "Loan")  evidenced by one or more promissory notes (whether one or more, the
"Note") as follows:

Line of Credit - in the principal amount of $10,000,000.00 which is evidenced by
the Promissory Note of even date herewith ("Line of Credit Note 1"), under which
Borrower may borrow,  repay,  and  reborrow,  from time to time,  so long as the
total  indebtedness  outstanding  at any one time does not exceed the  principal
amount.  The Loan proceeds are to be used by Borrower  solely to provide funding
for  mergers,  acquisitions  and/or  joint  ventures  of  entities in a business
related to that of Borrower.  Upon  consummation  of any of the above,  Borrower
will provide Bank proforma  financial  statements  on the resulting  entity with
detail satisfactory to Bank. Bank's obligation to advance or readvance under the
Line of  Credit  Note 1 shall  terminate  if a  default  in the  payment  of the
Obligations  occurs  or the  Borrower  is in  Default  (as  defined  in the Loan
Documents) under any Loan Document, or in any event, on February 28, 1998 unless
renewed or  extended  by Bank in writing  upon such terms then  satisfactory  to
Bank.

Line of Credit - in the principal amount of $5,000,000.00  which is evidenced by
the Promissory Note of even date herewith ("Line of Credit Note 2"), under which
Borrower may borrow,  repay,  and  reborrow,  from time to time,  so long as the
total  indebtedness  outstanding  at any one time does not exceed the  principal
amount.  The Loan proceeds are to be used by Borrower solely for working capital
and general corporate expenses.  Bank's obligation to advance or readvance under
the Line of Credit  Note 2 shall  terminate  if a default in the  payment of the
Obligations  occurs  or the  Borrower  is in  Default  (as  defined  in the Loan
Documents) under any Loan Document, or in any event, on February 28, 1998 unless
renewed or  extended  by Bank in writing  upon such terms then  satisfactory  to
Bank.

This  Agreement  also amends and  restates in its  entirety  that  certain  Loan
Agreement dated March 13, 1996 and applies to govern all of the loans thereby.

This  Agreement  applies  to the Loan and all Loan  Documents.  The terms  "Loan
Documents"  and  "Obligations,"  as used in this  Agreement,  are defined in the
Note. The term "Borrower" shall include its Subsidiaries and Affiliates. As used
in this  Agreement as to Borrower,  "Subsidiary"  shall mean any  corporation of
which more than 50% of the issued and outstanding voting stock is owned directly
or indirectly by Borrower. As to Borrower, "Affiliate" shall have the meaning as
defined in 11 U.S.C.  ss. 101,  except that the term  "debtor"  therein shall be
substituted by the term "Borrower" herein.


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Relying upon the covenants, agreements, representations and warranties contained
in this  Agreement,  Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions  set forth herein,  and Bank and Borrower agree as
follows:

REPRESENTATIONS.  Borrower  represents  that from the date of this Agreement and
until  final  payment  in full of the  Obligations:  ACCURATE  INFORMATION.  All
information now and hereafter furnished to Bank is and will be true, correct and
complete.  Any such information  relating to Borrower's financial condition will
accurately  reflect  Borrower's  financial  condition as of the date(s) thereof,
(including  all  contingent  liabilities  of every type),  and Borrower  further
represents that its financial  condition has not changed materially or adversely
since the  date(s)  of such  documents.  AUTHORIZATION;  NON-CONTRAVENTION.  The
execution,   delivery  and  performance  by  Borrower  and  any  guarantor,   as
applicable,  of this  Agreement and other Loan  Documents to which it is a party
are within its power, have been duly authorized by all necessary action taken by
the duly  authorized  officers of Borrower and any guarantors and, if necessary,
by making appropriate  filings with any governmental  agency or unit and are the
legal,  binding,   valid  and  enforceable   obligations  of  Borrower  and  any
guarantors; and do not (i) contravene, or constitute (with or without the giving
of notice or lapse of time or both) a violation of any  provision of  applicable
law, a violation of the  organizational  documents of Borrower or any guarantor,
or a default under any agreement,  judgment,  injunction, order, decree or other
instrument binding upon or affecting  Borrower or any guarantor,  (ii) result in
the creation or  imposition  of any lien (other than the lien(s)  created by the
Loan Documents) on any of Borrower's or guarantor's  assets, or (iii) give cause
for the  acceleration  of any  obligations  of Borrower or any  guarantor to any
other creditor.  ASSET OWNERSHIP.  Borrower has good and marketable title to all
of the  properties  and assets  reflected  on the balance  sheets and  financial
statements  supplied Bank by Borrower,  and all such  properties  and assets are
free and clear of mortgages,  security deeds,  pledges,  liens, charges, and all
other encumbrances, except as otherwise disclosed to Bank by Borrower in writing
("Permitted Liens"). To Borrower's knowledge,  no default has occurred under any
Permitted Liens and no claims or interests adverse to Borrower's  present rights
in its properties and assets have arisen. DISCHARGE OF LIENS AND TAXES. Borrower
has duly  filed,  paid and/or  discharged  all taxes or other  claims  which may
become a lien on any of its  property or assets,  except to the extent that such
items are being  appropriately  contested in good faith and an adequate  reserve
for the payment thereof is being maintained. SUFFICIENCY OF CAPITAL. Borrower is
not, and after  consummation  of this  Agreement  and after giving effect to all
indebtedness incurred and liens created by Borrower in connection with the Loan,
will not be, insolvent  within the meaning of 11 U.S.C. ss. 101(32).  COMPLIANCE
WITH LAWS. Borrower is in compliance in all respects with all federal, state and
local laws,  rules and  regulations  applicable to its  properties,  operations,
business, and finances, including, without limitation, any federal or state laws
relating  to  liquor  (including  18  U.S.C.  ss.  3617,  et seq.) or  narcotics
(including  21  U.S.C.ss.  801,  et seq.)  and/or  any  commercial  crimes;  all
applicable federal, state and local laws and regulations intended to protect the
environment; and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), if applicable.  ORGANIZATION AND AUTHORITY. Each corporate or limited
liability  company Borrower and any guarantor,  as applicable,  is duly created,
validly  existing  and in good  standing  under  the  laws of the  state  of its
organization,  and  has  all  powers,  governmental  licenses,   authorizations,
consents and approvals  required to operate its business as now conducted.  Each
corporate or limited  liability  company Borrower and any guarantor,  if any, is
duly  qualified,  licensed  and in  good  standing  in each  jurisdiction  where
qualification  or  licensing  is required  by the nature of its  business or the
character and location of its property,  business or customers, and in which the
failure  to so  qualify or be  licensed,  as the case may be, in the  aggregate,
could  have a  material  adverse  effect on the  business,  financial  position,
results  of  operations,  properties  or  prospects  of  Borrower  or  any  such
guarantor.  NO LITIGATION.  There are no pending or threatened suits,  claims or
demands  against  Borrower or any guarantor that have not been disclosed to Bank
by Borrower in writing.


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AFFIRMATIVE COVENANTS.  Borrower agrees that from the date of this Agreement and
until final  payment in full of the  Obligations,  unless  Bank shall  otherwise
consent in writing, Borrower will: BUSINESS CONTINUITY.  Conduct its business in
substantially  the same  manner and  locations  as such  business is now and has
previously been conducted. MAINTAIN PROPERTIES.  Maintain, preserve and keep its
property  in good  repair,  working  order  and  condition,  making  all  needed
replacements,  additions and improvements thereto, to the extent allowed by this
Agreement.  ACCESS TO BOOKS & RECORDS.  Allow Bank, or its agents, during normal
business  hours,  access to the  books,  records  and such  other  documents  of
Borrower as Bank shall reasonably require, and allow Bank to make copies thereof
at Bank's expense. INSURANCE.  Maintain adequate insurance coverage with respect
to its  properties  and business  against loss or damage of the kinds and in the
amounts  customarily  insured  against by  companies of  established  reputation
engaged  in the  same  or  similar  businesses  including,  without  limitation,
commercial general liability  insurance,  workers  compensation  insurance,  and
business  interruption  insurance;  all  acquired in such  amounts and from such
companies  as Bank may  reasonably  require.  NOTICES.  Promptly  notify Bank in
writing of (i) any material  adverse  change in its  financial  condition or its
business;  (ii) any  default  under any  material  agreement,  contract or other
instrument to which it is a party or by which any of its  properties  are bound,
or any acceleration of the maturity of any indebtedness owing by Borrower; (iii)
any material  adverse  claim  against or  affecting  Borrower or any part of its
properties;  (iv) the  commencement of, and any material  determination  in, any
litigation with any third party or any proceeding before any governmental agency
or unit affecting Borrower;  and (v) at least 30 days prior thereto,  any change
in  Borrower's  name or address as shown above,  and/or any change in Borrower's
structure.   COMPLIANCE  WITH  OTHER  AGREEMENTS.  Comply  with  all  terms  and
conditions contained in this Agreement,  and any other Loan Documents,  and swap
agreements,  if applicable,  as defined in the Note.  PAYMENT OF DEBTS.  Pay and
discharge  when due,  and before  subject to  penalty  or  further  charge,  and
otherwise satisfy before maturity or delinquency, all obligations, debts, taxes,
and  liabilities  of whatever  nature or amount,  except those which Borrower in
good faith disputes.  REPORTS AND PROXIES.  Deliver to Bank, promptly, a copy of
all  financial  statements,  reports,  notices,  and proxy  statements,  sent by
Borrower to  stockholders,  and all regular or periodic  reports  required to be
filed by Borrower with any  governmental  agency or authority.  OTHER  FINANCIAL
INFORMATION.  Deliver promptly such other  information  regarding the operation,
business affairs,  and financial condition of Borrower which Bank may reasonably
request. ESTOPPEL CERTIFICATE.  Furnish, within 15 days after request by Bank, a
written statement duly acknowledged of the amount due under the Loan and whether
offsets or defenses  exist against the  Obligations.  CHANGE OF CONTROL.  Ensure
that Robert  Kopstein  maintains at least a 51% ownership  interest in Borrower.
LIFE  INSURANCE.  Maintain no less than $2.0 million of life insurance on Robert
Kopstein.

NEGATIVE  COVENANTS.  Borrower  agrees that from the date of this  Agreement and
until final  payment in full of the  Obligations,  unless  Bank shall  otherwise
consent in writing, Borrower will not: NONPAYMENT;  NONPERFORMANCE.  Fail to pay
or perform the Obligations or Default (as defined in the Loan  Documents)  under
any of the Loan Documents.  CROSS DEFAULT.  Default in payment or performance of
any obligation under any other loans,  contracts or agreements of Borrower,  any
Subsidiary  or  Affiliate  of  Borrower  ("Affiliate"  shall have the meaning as
defined in 11 U.S.C.  ss. 101,  except that the term  "debtor"  therein shall be
substituted  by  the  term  "Borrower"  herein;   "Subsidiary"  shall  mean  any
corporation of which more than 50% of the issued and outstanding voting stock is
owned  directly  or  indirectly  by  Borrower),  any  general  partner of or the
holder(s)  of the  majority  ownership  interests  of Borrower  with Bank or its
affiliates; MATERIAL CAPITAL STRUCTURE OR BUSINESS ALTERATION.  Materially alter
the  type  or kind  of  Borrower's  business  or  that  of its  Subsidiaries  or
Affiliates,  if any; or suffer or permit the acquisition of substantially all of
Borrower's  business  or  assets,  or a material  portion  (10% or more) of such
business  or  assets if such a sale is  outside  Borrower's  ordinary  course of
business,  or more than 50% of its outstanding stock or voting power in a single
transaction or a series of  transactions;  or acquire  substantially  all of the
business or assets or more than 50% of the outstanding  stock or voting power of
any other  entity;  or enter  into any  merger or  consolidation  without  prior
written consent of Bank. DEFAULT ON OTHER


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CONTRACTS OR  OBLIGATIONS.  Default on any material  contract with or obligation
when due to a third party or default in the  performance  of any obligation to a
third party incurred for money  borrowed in an amount in excess of  $100,000.00.
JUDGMENT  ENTERED.  Permit the entry of any monetary  judgment or the assessment
against,  the filing of any tax lien  against,  or the  issuance  of any writ of
garnishment  or  attachment  against any property of or debts due Borrower in an
amount in excess of  $50,000.00  and that is not  discharged or execution is not
stayed within  Thirty (30) days of entry.  GOVERNMENT  INTERVENTION.  Permit the
assertion  or  making  of any  seizure,  vesting  or  intervention  by or  under
authority of any government by which the management of Borrower or any guarantor
is displaced of its authority in the conduct of its respective  business or such
business is curtailed or materially  impaired.  PREPAYMENT OF OTHER DEBT. Retire
any long-term debt entered into prior to the date of this Agreement at a date in
advance of its legal  obligation to do so. RETIRE OR REPURCHASE  CAPITAL  STOCK.
Retire or  otherwise  acquire any of its capital  stock.  ENCUMBRANCES.  Create,
assume, or permit to exist any mortgage,  security deed, deed of trust,  pledge,
lien,  charge or other  encumbrance  on any of its assets,  whether now owned or
hereafter  acquired,  other than:  (i) security  interests  required by the Loan
Documents; (ii) liens for taxes contested in good faith; (iii) liens accruing by
law for employee benefits; or (iv) Permitted Liens.

FINANCIAL COVENANTS.  Borrower, on a consolidated basis, agrees to the following
provisions  from the date of this  Agreement  and until final payment in full of
the  Obligations,  unless  Bank  shall  otherwise  consent in  writing:  DEPOSIT
RELATIONSHIP.  Borrower shall maintain its primary  depository  account and cash
management account with Bank.

ANNUAL  FINANCIAL  STATEMENTS.  Borrower shall deliver to Bank,  within 120 days
after the close of each fiscal year, audited financial statements reflecting its
operations during such fiscal year,  including,  without  limitation,  a balance
sheet,  profit and loss statement and statement of cash flows,  with  supporting
schedules;  all on a  consolidated  and  consolidating  basis and in  reasonable
detail,  prepared in conformity with generally accepted  accounting  principles,
applied  on a  basis  consistent  with  that of the  preceding  year.  All  such
statements  shall be  examined by an  independent  certified  public  accountant
acceptable to Bank. The opinion of such independent  certified public accountant
shall not be  acceptable to Bank if qualified  due to any  limitations  in scope
imposed by Borrower or its Subsidiaries,  if any. Any other qualification of the
opinion by the  accountant  shall  render  the  acceptability  of the  financial
statements subject to Bank's approval.

PERIODIC  FINANCIAL  STATEMENTS.   Borrower  shall  deliver  to  Bank  unaudited
management-prepared   quarterly   financial   statements,   including,   without
limitation,  a balance  sheet,  profit and loss  statement and statement of cash
flows, with supporting  schedules,  as soon as available and in any event within
45 days  after the close of each  such  period;  all in  reasonable  detail  and
prepared in conformity with generally accepted accounting principles, applied on
a basis  consistent with that of the preceding  year.  Such statements  shall be
certified as to their correctness by a principal financial officer of Borrower.

FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time,  including without limitation,
financial   statements  and  information   pertaining  to  Borrower's  financial
condition. Such information shall be true, complete, and accurate.

CONDITIONS PRECEDENT.  The obligations of Bank to make the Loan and any advances
pursuant to this  Agreement are subject to the following  conditions  precedent:
ADDITIONAL DOCUMENTS. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request.


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IN WITNESS WHEREOF,  Borrower and Bank, on the day and year first written above,
have caused this  Agreement  to be executed  under seal,  AND THIS  AGREEMENT IS
DEEMED EFFECTIVE AS OF FEBRUARY 28, 1997.

                               Optical Cable Corporation, a Virginia Corporation
                               Taxpayer Identification Number: 54-1237042

CORPORATE                      By: /s/ Robert Kopstein
SEAL                              ---------------------------------------
                                  Robert Kopstein, President

                               First Union National Bank of Virginia

CORPORATE                      By:   /s/ William C. Moses
SEAL                              ---------------------------------------
                               Title:    Vice President
                                     -------------------------------------


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<PAGE>

                             MODIFICATION NUMBER ONE
                              TO THE LOAN AGREEMENT

Optical Cable Corporation
5290 Concourse Drive N.W.
Roanoke, Virginia 24019
(Individually and collectively, "Borrower")

First Union National Bank
201 South Jefferson Street
Roanoke, Virginia 24011
(Hereinafter referred to as the "Bank")

THIS  AGREEMENT  is  entered  into as of March 5, 1998 by and  between  Bank and
Borrower.

WHEREAS,  Bank is the holder of a  Promissory  Note  executed  and  delivered by
Borrower,   dated  April  25,  1997,  in  the  original   principal   amount  of
$10,000,000.00  (the "Note  Number 1");  and Bank is the holder of a  Promissory
Note executed and  delivered by Borrower,  dated April 25, 1997, in the original
principal amount of $5,000,000.00 (the "Note Number 2");

WHEREAS,  in connection  with execution of the Note,  Borrower also executed and
delivered  to Bank certain  other Loan  Documents,  including a Loan  Agreement,
dated April 25, 1997 (the "Loan Agreement"); and

WHEREAS,  Borrower  and  Bank  have  agreed  to  modify  the  terms  of the Loan
Agreement.

NOW, THEREFORE, in consideration of the premises contained herein and other good
and valuable  consideration,  receipt and sufficiency of which is  acknowledged,
the parties agree as follows:

OUTSTANDING  BALANCE.  The total outstanding  unpaid principal balance under the
Note  Number  1 as of  March  6,  1998 is $0.00  and  total  outstanding  unpaid
principal  balance  under the Note  Number 2 as of March 6,  1998 is $0.00.  The
parties  acknowledge  that  interest  on the  obligations  under Note 1 and Note
Number 2 are paid through March 6, 1998.

MODIFICATIONS.

     1. The section  entitled  FINANCIAL  STATEMENTS  of the Loan  Agreement  is
     hereby amended by deleting the subparagraph(s)  entitled PERIODIC FINANCIAL
     STATEMENTS and adding the following in its place and stead:

     PERIODIC  FINANCIAL  STATEMENTS.  Borrower  shall deliver to Bank unaudited
     management-prepared  quarterly  financial  statements,  including,  without
     limitation,  a balance  sheet,  profit and loss  statement and statement of
     cash flows,  with  supporting  schedules,  as soon as available  and in any
     event within 60 days after the close of each such period; all in reasonable
     detail and  prepared  in  conformity  with  generally  accepted  accounting
     principles,  applied on a basis consistent with that of the preceding year.
     Such statements  shall be certified as to their  correctness by a principal
     financial officer of Borrower.

     2. The section entitled NEGATIVE  COVENANTS of the Loan Agreement is hereby
     amended by  deleting  the  subparagraph(s)  entitled  Retire or  Repurchase
     Capital Stock and adding the following in its place and stead:


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     RETIRE OR REPURCHASE CAPITAL STOCK. Retire or otherwise acquire its capital
     stock in an amount  greater than  $5,000,000.00.  Any such  acquisition  of
     capital stock must be paid for from available cash on hand.

     3. The section entitled NEGATIVE  COVENANTS of the Loan Agreement is hereby
     amended by adding the subparagraph(s) entitled Guarantees:

     GUARANTEES.  Guarantee or otherwise  become  responsible for obligations of
     any other person or persons other than the  endorsement of check and drafts
     for collection in the ordinary course of business.

     4. The section  entitled  AFFIRMATIVE  CONVENANTS of the Loan  Agreement is
     hereby amended by deleting the  subparagraph(s)  entitled Change of Control
     and adding  the  following  it its place and stead as a  Negative  Covenant
     paragraph.

     CHANGE OF CONTROL.  Make a material  change of ownership  that  effectively
     changes control of Borrower.

ACKNOWLEDGEMENTS.  Borrower  acknowledges and represents that the Note and other
Loan Documents,  as amended hereby, are in full force and effect and are binding
upon it, its successors,  assigns, administrators and heirs without any defense,
counterclaim,  right or claim of set-off or of other sum due; that, after giving
effect to this  Agreement,  no default or event that with the passage of time or
giving of  notice  would  constitute  a default  under  the Loan  Documents  has
occurred;  that  all  representations  and  warranties  contained  in  the  Loan
Documents are true and correct as of this date;  that there have been no changes
in the ownership of any collateral  pledged to secure the Obligations  since the
dates of the instruments originally pledging such collateral;  and that Borrower
has taken all  necessary  action  (corporate  or  otherwise)  to  authorize  the
execution and delivery of this  Agreement.  This  Agreement  constitutes  only a
modification of an existing  obligation  owing by Borrower to Bank, and is not a
novation.

LIENS. Borrower  acknowledges and confirms the extent,  validity and priority of
the Bank's  security  interests  and liens in the  collateral  pledged,  if any,
pursuant to the Loan Documents, and agrees that such security interest and liens
shall secure the Borrower's  Obligations to Bank,  including any modification of
the Note or Loan Agreement, and all future modifications,  extensions,  renewals
and/or replacements of the Loan Documents.

MISCELLANEOUS. This Agreement shall be construed in accordance with and governed
by the  laws  of  the  applicable  state  as  originally  provided  in the  Loan
Documents,  without reference to the state's conflicts of laws principles.  This
Agreement  and the other Loan  Documents  constitute  the sole  agreement of the
parties  with  respect to the  subject  matter  thereof and  supersede  all oral
negotiations  and prior writings with respect to the subject matter thereof.  No
amendment of this Agreement,  and no waiver of any one or more of the provisions
hereof shall be effective  unless set forth in writing and signed by the parties
hereto.  The illegality,  unenforceability  or inconsistency of any provision of
this   Agreement   shall  not  in  any  way  affect  or  impair  the   legality,
enforceability  or consistency of the remaining  provisions of this Agreement or
the other  Loan  Documents.  This  Agreement  and the other Loan  Documents  are
intended to be consistent.  However, in the event of any  inconsistencies  among
this Agreement and by any of the Loan  Documents,  the terms of this  Agreement,
and then the Note,  shall control.  This Agreement may be executed in any number
of counterparts and by the different parties on separate counterparts. Each such
counterpart  shall  be  deemed  an  original,  but all such  counterparts  shall
together constitute one and the same agreement.

DEFINITIONS.  The term "Loan  Documents"  used in this  Agreement and other Loan
Documents  refers to all  documents,  agreements,  and  instruments  executed in
connection  with any of the Obligations  (as defined  herein),  and may include,
without limitation,  modification  agreements, a commitment letter that survives
closing, a loan agreement,  any note, guaranty agreements,  security agreements,
security  instruments,  financing statements,  mortgage instruments,  letters of
credit and any  renewals or  modifications,  whenever any of the  foregoing  are
executed,  but does not include  swap  agreements  (as defined in 11 U.S.C.  ss.
101).  The  term  "Obligations"  used in this  Agreement  refers  to any and all
indebtedness and other obligations of every kind and description of the Borrower
to the Bank or to any Bank  affiliate,  whether or not under the Loan Documents,
and  whether  such debts or  obligations  are  primary or  secondary,  direct or
indirect, absolute or contingent,  sole, joint or several, secured or unsecured,
due  or  to  become  due,  contractual,   including,  without  limitation,  swap
agreements  (as  defined in 11 U.S.C.  ss.  101),  arising  by tort,  arising by
operation  of law, by  overdraft or  otherwise,  or now or  hereafter  existing,
including, without limitation,  principal,  interest, fees, late fees, expenses,
attorneys' fees and costs that have been or may hereafter be contracted or


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incurred.  Terms used in this Agreement  which are capitalized and not otherwise
defined herein shall have the meanings ascribed to such terms in the Note and/or
other Loan Documents.

ARBITRATION.  Upon  demand of any party  hereto,  whether  made  before or after
institution  of any  judicial  proceeding,  any  dispute,  claim or  controversy
arising out of,  connected  with or relating  to this  Agreement  and other Loan
Documents  ("Disputes")  between  or among  parties to this  Agreement  shall be
resolved by binding  arbitration  as provided  herein.  Institution  of judicial
proceeding  by a party  does  not  waive  the  right  of that  party  to  demand
arbitration hereunder.  Disputes may include, without limitations,  tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration, claims
brought as class actions,  claims  arising from Loan  Documents  executed in the
future, or claims arising out of or connected with the transaction  reflected by
this Agreement.

Arbitration  shall be conducted  under and governed by the Commercial  Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association  (the "AAA") and Title 9 of the U.S. Code. All arbitration  hearings
shall be conducted in the city in which the office of Bank first stated above is
located.  The  expedited  procedures  set  forth  in  Rule  51 et  seq.  of  the
Arbitration Rules shall be applicable to claims of less than $1,000,000.00.  All
applicable  statutes of limitation  shall apply to any Dispute.  A judgment upon
the award may be entered in any court having jurisdiction.  The panel from which
all  arbitrators  are selected  shall be comprised  of licensed  attorneys.  The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction,  state or federal, of the state where
the hearing will be conducted or if such person is not  available to serve,  the
single  arbitrator may be a licensed  attorney.  Notwithstanding  the foregoing,
this  arbitration  provision does not apply to disputes under or related to swap
agreements.

PRESERVATION AND LIMITATION OF REMEDIES.  Notwithstanding  the preceding binding
arbitration provisions, Bank and Borrower agree to preserve, without diminution,
certain   remedies  that  any  party  hereto  may  employ  or  exercise  freely,
independently  or in  connection  with an  arbitration  proceeding  or  after an
arbitration action is brought. Bank and Borrower shall have the right to proceed
in any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable:  (i) all rights to foreclose against any real
or personal  property or other  security by  exercising  a power of sale granted
under Loan  Documents or under  applicable  law or by judicial  foreclosure  and
sale,  including a proceeding to confirm the sale;  (ii) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful  possession of personal  property;  (iii) obtaining  provisional or
ancillary remedies  including  injunctive  relief,  sequestration,  garnishment,
attachment,  appointment  of  receiver  and  filing  an  involuntary  bankruptcy
proceeding;  and (iv) when  applicable,  a judgment by  confession  of judgment.
Preservation  of these  remedies  does not limit the power of an  arbitrator  to
grant similar remedies that may be requested by a party in a Dispute.

Borrower  and Bank  agree  that  they  shall not have a remedy  of  punitive  or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or  exemplary  damages they have now or which may arise in the
future in  connection  with any  Dispute  whether  the  Dispute is  resolved  by
arbitration or judicially.

IN WITNESS  WHEREOF,  the undersigned  have signed and sealed this agreement the
day and year first above written.

                           Optical Cable Corporation
                           Taxpayer Identification Number: 54-1237042


                                   Page 3 of 4

<PAGE>



CORPORATE               By:/s/ Robert Kopstein
SEAL                       --------------------------------
                           Robert Kopstein, President

                           First Union National Bank

CORPORATE               By:/s/ Susan K. Doyle
SEAL                       --------------------------------
                           Susan K. Doyle, Vice President




                                   Page 4 of 4

<PAGE>


                             MODIFICATION NUMBER TWO
                              TO THE LOAN AGREEMENT

Optical Cable Corporation
5290 Concourse Drive, N.W.
Roanoke, Virginia 24019
(Individually and collectively, "Borrower")

First Union National Bank
201 South Jefferson Street
Roanoke, Virginia 24011
(Hereinafter referred to as the "Bank")

THIS  AGREEMENT  is entered  into as of August 11, 1998 by and between  Bank and
Borrower.

                                    RECITALS

WHEREAS,  Bank is the holder of a  Promissory  Note  executed  and  delivered by
Borrower,   dated  April  25,  1997,  in  the  original   principal   amount  of
$10,000,000.00  (the "Note  Number 1");  and Bank is the holder of a  Promissory
Note executed and  delivered by Borrower,  dated April 25, 1997, in the original
principal amount of $5,000,000.00 (the "Note Number 2").

WHEREAS,  in  connection  with  execution  of Note  Number 1 and Note  Number 2,
Borrower  also  executed and  delivered to Bank  certain  other Loan  Documents,
including a Loan Agreement, dated April 25, 1997 and all modification thereafter
(the "Loan Agreement"); and

Borrower and Bank have agreed to modify the terms of the Loan Agreement.

In  consideration  of Bank's  continued  extension of credit and the  agreements
contained herein, the parties agree as follows:

                                    AGREEMENT

ACKNOWLEDGMENT OF BALANCE. Borrower acknowledges that the most recent Commercial
Loan Invoice sent to Borrower with respect to the Obligations  under the Note is
correct.

MODIFICATIONS.

     1.   The Section  entitled  NEGATIVE  COVENANTS  of the Loan  Agreement  is
          hereby  amended by deleting  the  subparagraph(s)  entitled  Retire or
          Repurchase  Capital  Stock and adding the  following  in its place and
          stead:

          NEGATIVE  COVENANTS.  Borrower  agrees  that from the date  hereof and
          until  final  payment in full of the  Obligations,  unless  Bank shall
          otherwise consent in writing,  Borrower will not: RETIRE OR REPURCHASE
          CAPITAL  STOCK.  Retire or otherwise  acquire its capital  stock in an
          amount greater than  $10,000,000.00.  Any such  acquisition of capital
          stock must be paid for from working  capital or other  sources  deemed
          appropriate by the officers of the corporation.

ACKNOWLEGMENTS.  Borrower  acknowledges  and represents  that the Note and other
Loan  Documents,  as amended  hereby,  are in full force and effect  without any
defense,  counterclaim,  right or claim of set-off; that, after giving effect to
this  Agreement,  no default or event that with the passage of time or giving of
notice would  constitute a default under the Loan  Documents has occurred;  that
all representations and warranties contained in the


                                   Page 1 of 2

<PAGE>



Loan Documents are true and correct as of this date; that Borrower has taken all
necessary action to authorize the execution and delivery of this Agreement;  and
that this  Agreement is a  modification  of an existing  obligation and is not a
novation.

COLLATERAL.  The  Borrower  acknowledges  and  confirms  that there have been no
changes in the  ownership of any  collateral  pledged to secure the  Obligations
(the "Collateral")  since the Collateral was originally  pledged;  that the Bank
has  existing,  valid  first  priority  security  interests  and  liens  in  the
Collateral;  and that  such  security  interests  and  liens  shall  secure  the
Borrower's  Obligations to Bank,  including any modification of the Note or Loan
Agreement, and all future modifications, extension, renewals and/or replacements
of the Loan Documents.

MISCELLANEOUS. This Agreement shall be construed in accordance with and governed
by the  laws  of  the  applicable  state  as  originally  provided  in the  Loan
Documents,  without reference to that state's conflicts of laws principles. This
Agreement  and the other Loan  Documents  constitute  the sole  agreement of the
parties  with  respect to the  subject  matter  thereof and  supersede  all oral
negotiations  and prior writings with respect to the subject matter thereof.  No
amendment of this Agreement,  and no waiver of any one or more of the provisions
hereof shall be effective  unless set forth in writing and signed by the parties
hereto.  The illegality,  unenforceability  or inconsistency of any provision of
this   Agreement   shall  not  in  any  way  affect  or  impair  the   legality,
enforceability  or consistency of the remaining  provisions of this Agreement or
the other  Loan  Documents.  This  Agreement  and the other Loan  Documents  are
intended to be consistent.  However, in the event of any  inconsistencies  among
this Agreement and any of the Loan Documents,  the terms of this Agreement,  and
then the Note,  shall  control.  This Agreement may be executed in any number of
counterparts and by the different  parties on separate  counterparts.  Each such
counterpart  shall be deemed an original,  but all  counterparts  shall together
constitute one and the same  agreement.  Terms used in this Agreement  which are
capitalized and not otherwise defined herein shall have the meanings ascribed to
such terms in the Loan Documents.

IN WITNESS  WHEREOF,  the undersigned  have signed and sealed this Agreement the
day and year first above written.

                                    Optical Cable Corporation

CORPORATE                           By: /s/ Robert Kopstein
SEAL                                   --------------------------------
                                       Robert Kopstein, President

                                    First Union National Bank

CORPORATE                           By: /s/ Susan Doyle
SEAL                                   --------------------------------
                                       Susan Doyle, Vice President



                                   Page 2 of 2

<PAGE>

First Union National Bank
of Virginia
Post Office Box 13327
Roanoke, Virginia  24040



[FIRST UNION LOGO]

January 25, 1999

Mr. Neil D. Wilken, Jr.
McGuire, Woods, Battle & Boothe, LLP
One James Center
901 East Cary Street
Richmond, Virginia  23219-4030

RE:  Optical Cable Corporation

Dear Mr. Wilkin:

Please  accept  this  letter as  confirmation  that the Loan  Agreement  between
Optical Cable Corporation and First Union National Bank dated April 27, 1997 has
been  extended as described in the  Commitment  Letter dated  February 25, 1998.
Specifically,  advances under the two referenced  lines of credit in the amounts
of $10,000,000 and $5,000,000 are permitted through February 28, 1999.

Please  call me at (540)  563-6667  or  (800)  813-0722  if you need  additional
information.

Sincerely,

/s/ William C. Moses
--------------------------
William C.  Moses
Vice President